Ri:ctiv:"0 

FEQLRAL a.ECTiaN 

conrHSoioN 

1 BEFORE THE FEDERAL ELECTION COMMISSION 

? T ^>r f ^ 20!5Ja23- r'rr3:G3 3 In the Matter of ) 

4 ) MURs. 6391 and 6471 pr-, 

5 Commission on Hope, Growth ) ULLA 

6 and. Opportunity ) 

7 ). 

8 

9 

10 SECOND GENERAL COUNSEL'S REPORT 

11 

12 I. ACTIONS RECOMMENDED 

13 We recommend that the Commission: (1) find reason to believe that the Commission on 

.14 Hope, Growth and Opportunity violated 52 U.S.C. §§ 30102, 30103, 30104, 30120(a)(3), and 

15 30120(d)(2); (2) enter into pre-probable cause conciliation with the Commission on Hope, 

16 Growth, and Opportunity; (3) approve the attached Factual and Legal Analysis; (4) 

17 and (5) approve the appropriate letter. 

18 II. INTRODUCTION 

19 The Commission previously found reason to believe that the Commission on Hope, 

20 Growth and Opportunity ("CHGO") violated 52 U.S.C. § 30104 of the Federal .Election 

21 Campaign Act of 1971, as amended (the "Act"), by failing to report as electioneering 

22 communications or independent expenditures several advertisements that it had disseminated 

23 during the 2010 election cycle.' At that time, the Commission took no action with respect to 

24 CHGO's alleged violations of 52 U.S.C. § 30102(a)(3) and (d)(2) by failing to include proper 

25 disclaimers on its communications and 52 U.S.C. §§ 30102, 30103, and 30104 by failing to 

.26 organize, register,, and report as a political committee.^ 

' See Amended Certification, MURs 6391, 6471 (Sept. 16,2014). 

^ Id. 
MURs 639.1 and 6471 (Commission on Hope, Growth and Opportunity). 

Second General Counsel's Report 

Page 2 of 18 

1 Our investigation regarding CHGO's expenditures for the advertisements at issue 

2 confirmed that all of the media spending that CHGO had disclosed on its 2010 Form 990 filed 

3 with the Internal Revenue Service ("IRS") related to the advertisements identified in the 

4 Complaints. The evidence obtained during the investigation also tends to support bur prior 

5 conclusion that CHGO's major purpose was the nomination or election of federal candidates and, 

6 thus, that CHGO failed to include proper disclaimers on its communications, Accordingly, we 

7 recommend that the Commission find reason to believe that CHGO violated 52 U.S.C. §§ 30102, 

8 30103, 30104, 30120(a)(3), and 30120(d)(2) and enter into pre-probable cause conciliation with 

9 CHGO. 

10 III. RESULTS OF INVESTIGATION 

11 A. Background 

12 The Complaints in this matter alleged that CHGO violated the Act by failing to report 

13 and include proper disclaimers on advertisements that cost over $2 million.^ Copies of the 

14 following advertisements were a,ttached to the MUR 6471 Complaint: 

CHGO 

Advertisement 

Federal Candidatc(s) Identified Broadcast. 

Areafs)"* 

Cost^ 

"Collectible Coin" 

(7 versions) 

John Spratt/Mick Mulvaney; 

Walt Minnick; Suzanne 

Kosmas/Sandy Adams; Baron 

Hill/Todd Young; C.A. 

Ruppersberger/Marcelo 

Cardarelli; Paul Kanjorski/Lou 

Barletta; Dan Maffei/Ann Marie 

Buerkle 

"nine cities" $635,910 

' See 52 U.S.C. §§ 30104, 30120. 

Alison Fitzgerald, Secret Donors Multiply with Finances Dwarfing Watergate, DAILY HERALD, May 23, 

2011, 

^ Compl.at4-6,MUR6471, 
MURs 6391 and 6471 (Commission on Hope, Growth and Opportunity) 

Second General Counsel's Report 

Page 3 of 18 

"Make America 

Work" 

(2 versions) 

John Salazar/Scott Tipton; 

Dan Maffei/Ann Marie Buerkle 

Unknown $362,810 

"Song and Dance" 

(4 versions) 

John Spratt/Mick Mulvaney; 

Kathy Dahlkemper/Mike Kelly; 

Frank Kratovil/Andy Harris; 

Allen Boyd/Steve Southerland 

South Carolina, 

Maryland, 

Pennsylvania, 

Ohio, Florida 

$793,150 

"What She Believes" Carol Shea-Porter Manchester, NH; 

Portland, ME; 

Boston 

$415,270 

"Queen Nancy" Allen Boyd Unknown $41,100 

1 At the reason-to-believe stage, the available information indicated that CHGO may have 

2 raised and spent more than twice that amount on advertisements during the 2010 election cycle. 

3 According to CHGO's 2010 Form 990, CHGO received $4,801,000 in contributions from 

4 fundraising events during calendar year 2010.® For the same period, CHGO's tax return reported 

5 $4,770,000 in expenses, including $4,319,825 to Meridian Strategies, LLC ("Meridian") for 

6 media placement, $275,000 to Meridian for media production, $ 105,175 to Meridian for 

7 advertising and technology, and $70,000 in compensation to its President/Executive Director and 

8 its General Counsel.' It also appeared that CHGO engaged in no significant non-electoral 

9 activity. 

10 Based on the available information, the Commission found reason to believe that CHGO 

11 violated 52 U.S.C. § 30104 by failing to report the advertisements identified in the Complaints. 

12 The Commission conducted an investigation to determine CHGO's reporting obligations and to 

® Compl., MUR 6471, Ex. C (Form 990 - Return of Organization Exempt from Income Tax (Nov. 14, 

2011)). 

Id. 
MURs 6391 and 6471 (Commission on Hope, Growth and Opportunity) 

Second General Counsel's Report 

Page4 of 18 

1 reconcile the amounts of the expenditures for the advertisertients identified in the Complaints 

2 with CHGO's total media spending as reported on its 2010 Form 990. The Commission.also 

3 notified CHGO of the additional issue raised in the MUR 6471 Amended Complaint concerning 

4 whether it satisfies the definition of "political committee" and would thus be subject to the Act's 

5 reporting and disclaimer requirements for political committees.® 

6 B. The Investigation 

7 After receiving notice of the. Commission's reason to believe finding and decision to 

8 investigate the apparent violations, CHGO's General Counsel, William B. Canfield III, contacted 

9 the Office of General Counsel ("OGC"). Canfield initially represented that he had no relevant 

10 infonnation or records concerning the advertisements at issue and did not know who would have 

11 that information.' Further, Canfield stated that the disbursements reported in CHGO's tax filings 

12 accurately reflected the group's spending and activities, but that he could not provide more 

13 detailed information.In the absence of probative information from CHGO, we identified 

14 additional witnesses who had worked for CHGO — President/Executive .Director James S. 

15 "Steve" Powell and Treasurer James D. Warring — and notified Canfield of our intention to seek 

16 information from them.'' 

' Factual and Legal Analysi.s at 9. 

' Beginning in 2010, the period during which CHGO engaged in the alleged activity that was the subject of 

our investigation, the Commission provided several notices to Canfield that instructed CHGO to preserve records 

related to the Complaints as required by law. Letter to William B. Canfield, Commission on.Hope, Growth and 

Opportunity (Oct. 15,2010); Letter to. William B. Canfield, Commission on Hope, Growth and Opportunity (May 

26,2011). 

Report of Investigation of Telephone Contact with William Canfield, Esq. (Oct. 15, 2014). 

" Id. 
MURs 6391 and 6471 (Commission on Hope, Growth and Opportunity) 

Second General Counsel's Report 

Page 5 of 18 

1 We first contacted Steve Powell, who was represented by Canfield during the interview. 

2 Powell explained that, althougli he was listed as President of CHGO in the group's tax filings, 

3 his role was lirhited to writing and producing the advertisements.'^ He explained that Michael 

4 Mihalke, a principal at Meridian, was responsible for billing and invoicing the advertisements, 

5 but believed that any relevant records would have been destroyed shortly after the 

6 advertisements aired.'' Even without records, however, Powell and Canfield were able to 

7 confirm both that the advertisements identified, in the Complaints were the only advertisements 

8 disseminated by CHGO and that these advertisements represented all of CHGO's media 

9 spending.''' 

10 Next, we interviewed James Warring, Treasurer of CHGO and founder of Warring & 

11 Company, LLC, the firm responsible for CHGO's accounting and tax filings." Warring 

12 explained that an employee of the fimi, not Warring, was personally responsible for preparing 

13 CHGO's filings with the IRS.'® Warring stated that his firm typically returns to its clients the 

14 financial records that it uses to prepare tax filings and that his file for CHGO contained little 

15 information." Warring identified a spreadsheet in his file,, however, that contained the figures 

Report of Investigation of Interview of James S. "Steve" Powell at 1 (Nov. 25, 2014) ("Powell ROI").. 

Id. at 2. 

Id 

Report of Investigation of Interview of James D. Warring (Dec. 19,2014). 

Id at 2. 

.Id at 3. 
MURs 6391. and 6471 (Commission on Hope, Growth and Opportunity) 

Second General Counsel's Report 

Page 6 of 18 

1 disclosed as disbursements on CHGO's 2010 Form 990, including payments to Meridian totaling 

2 $4.7 million in August, September, and October 2010.'* 

3 Following these interviews, several witnesses indicated that they would provide 

4 information regarding CHGO, but only if they were first served with compulsory process. In 

5 light of these requests and the absence of even basic financial records in response to our informal 

6 discovery efforts, the Commission approved compulsory process to obtain information and 

7 documents related to the CHGO advertisements and to identify any additional potential sources 

8 of information." Each of these individuals responded to the Commission's subpoenas and 

9 orders, but none supplied information or produced any records that itemized CHGO's spending 

10 on the advertisements." 

Id. We requested and obtained from Canfield two versions of the spreadsheet. Report oflnvestigation of 

Telephone Contacts with. William Canfield (Dec. 18,2014); Report oflnvestigation of E-mails from William 

Canfield (Jan. 21,2015). We identified Susi Cedillo, an employee of Warring & Company, LLC, as the 

spreadsheet's author and unsuccessfully attempted to arrange an interview with Warring and Cedillo regarding the 

spreadsheet. Report oflnvestigation of Telephone Contact with James Warring (Jan. 30, 2015); Report of 

Investigation ofTelephone Contact with James Warring (Additional Information) (Feb. 4,2015); Memorandum to 

File Re: Summary ofTelephone Call with James D. Warring (Feb. 5,2015). At that time, Canfield also stated that 

he no longer represented CHGO and, notwithstanding his involvement in this proceeding in his capacity as CHGO's 

designated counsel for these matters, that he considered his representation of CHGO to have ceased when CHGO 

filed its terminating 2011 Form 990 in the Spring of 2011. E-mail from William Canfield (Feb. 5,2015). 

" Orders to Submit Answers to Questions and Subpoenas to Produce Documents to William B. Canfield 111, 

James D. Warring, James S. Powell, Susi Cedillo, Meridian Strategie.s, LLC, and Michael H. Mihalke. (May 26, 

2015). 

For instance, Canfield's response asserted that his role at CHGO was limited to legal compliance and tliat 

he does not possess documents related to the funding, production, and placement of the CHGO advertisements. 

Response of William B. Canfield to Order to Submit Answers to Questions and Subpoena to Produce Documents 

at 1 (June 29,2015) ("Canfield Subpoena Resp."). Powell, for his part, stated that he was "the creative person" 

responsible for the content of CHGO's advertisements, but that he was not involved in the funding of the 

advertisements and has no documents related to the advertisements. Response of James S. Powell to Order to 

Submit Answers to Questions and Subpoena to Produce Documents at 2-3 (June 26. 2015) ("Powell Subpoena 

Resp."). 

The investigative record suggests that CHGO lacked a records retention policy, did not appear to otherwise 

attempt to retain records, and did not direct any of its vendors to retain records, de.spite notice from the Commission 

of the obligation to preserve relevant documents. None of the witnesses identified any records retention policy in 

place at CHGO or Meridian during the time CHGO conducted the activities at issue. Canfield Subpoena Resp. at 2; 

Powell Subpoena Resp. at 6; Response of Michael H. Mihalke to Order to Submit Answers to Questions and 
MURs 6391 and 6471 (Commission on Hope, Growth and Opportunity) 

Second General Counsel's Repoil 

Page? of 18 

1 Nonetheless, some of CHGO's vendors were able to provide responsive documents. For 

2 example, Mihalke produced several documents that appeared to reflect production costs of the 

3 advertisements but stated that he is ho longer in possession of any other documents related to the 

4 advertisements.^' Warring and CedillOj on the other hand, produced a number of CHGO 

5 financial and bank records, but none of the documents reflected a breakdo wn in spending on 

6 specific advertisements." Finally, Mihalke, Warring, and Cedillo also produced several 

7 documents that contain information relevant to CHGO's status as a political committee." 

8 IV. ANALYSIS 

9 A. Political Committee Status 

10 The First General Counsel's Report in this matter recommended that the Commission 

11 find reason to believe that CHGO Violated the Act by failing to register and report as a political 

Subpoena to Produce Documents at 5 (June 26, 2015) ("Mihalke Subpoena Resp."). Additionally, all of the relevant 

witnes.ses stated tliat they either did. not receive notice or did not recall, receiving notice to retain records relating to 

CHGO in light of the Commission's open matter. Response of James D. Warring to Order to Submit Answers to 

Questions and Subpoena to Produce Documents at 8 (June 29, 2015) ("Warring Subpoena Resp."); Powell Subpoena 

Resp. at 6; Mihalke Subpoena Resp. at 5. To tlie contrary, in response to the subpoenas Warring and Cedillo 

produced an April 16,2012 e-mail from Mihalke to Warring and Canfield suggesting thait CHGO be terminated 

"most quickly," because "[t]here is an outstanding matter at the Federal Elections [.«c] Commission and my sense is [ 

that we ought to shut it down to make things loss complicated moving forward." Warring Subpoena Resp. at FEC- f 

481; Response of Susi Cedillo to Order to Submit Answers to Questions and Subpoena to Produce Documents (July ; 

6, 2015) ("Cedillo Subpoena Resp.") at FEC-219. 

" Mihalke Subpoena Resp. at 5. Mihalke also staled that he "wrote memos, one or more PowerPoint 

presentations, proposed media buys, produced advertisements, including writing the scripts, and oversaw website 

development" for CHGO. Id. at 3, MHM-FEC-13-17. Meridian did not separately respond to the Commisision's 

subpoena. Mihalke's counsel represented tliat Mihalke was solely re.sponsible for Meridian and that Meridian had 

no additional information or records responsive to the subpoena. Memorandum to File Re: Summary of Telephone 

Call with Robert Kelner (July 9, 2015). 

" Warring Subpoena Re.sp. at FEC-275-300, FEC-366-382; Cedillo Subpoena Resp. at FEC-13-38, FEC-104-

120. Warring and Cedillo described their roles as providing bookkeeping and tax filing services and stated that they 

had no role with respect to CHGO's advertisements. Warring Subpoena Resp. at 3; Cedillo Subpoena Resp. at 3. 

Although the subpoena responses identified several otlier individuals involved with CHGO or Meridian, the 

only such person who we believe reasonably might have possessed records related to the advertisements is Scott 

Reed, a strategist who was involved in the formation of CHGO. Powell Subpoena Resp. at 3; Mihalke Subpoena 

Resp. at 2. In response to our inquiry, however. Reed represented that he had no documents relevant to the 

Commission's proceeding. Report of Investigation of Interview of Scott W. Reed at 1-2 (July 7, 2015). 
MURs 6391 and 6471 (Commission on Hope, Growth aiid Opportunity) 

Second General Counsel's Report 

Page 8 of 18 

1 committee because it spent over $2 million on independent expenditures and electioneering 

2 communications and did not appear to have engaged in any significant non-electoral activity. 

3 The evidence obtained in the course of the investigation — including confirmation that virtually 

4 all of CHGO's 2010 spending was for tlie advertisements identified in the Complaints — fiirther 

5 supports the conclusion that CHGO violated 52 U.S.C. §§ 30102, 30103, and 30104 by failing to 

6 organize, register, and report with the Commission as a political committee in 2010. 

7 Political committees must register with the Commission and periodically disclose their 

8 receipts and disbursements.^^ The Act and Commission regulations define a "political 

9 committee" as "any committee, club, association or other group of persons which receives 

10 contributions aggregating in excess of $ 1,000 during a calendar year or which makes 

11 expenditures aggregating in excess of $1,000 during a calendar year."^® In Buckley v. Valeo, the 

12 Supreme Court held that defining political committee status "only in terms of [the] amount of 

13 annual 'contributions' and 'expenditures'" might be overbroad, reaching "groups engaged purely 

14 in issue discussion."^' To cure that infirmity, the Court concluded that the term "political 

15 committee" "need only encompass organizations that are under the control of a candidate or the 

16 major purpose of which is the nomination or election of a candidate."^* Accordingly, under the 

17 statute as thus construed, an organization that is not controlled by a candidate must register as a 

24 

25 

26 

27 

28 

First Gen. Counsel's Rpt. at 3. 

52 U.S.C. §§ 30102,30103.30104. 

52 U.S.C. § 30101(4)(A); 11 C.F.R. § 100.5. 

424 U.S. 1,79(1976). 

Id. (emphasis added). 
MURs 6391 and 6471 (Commission on Hope, Growth and Opportunity) 

Second General Counsel's Report 

Page 9 of 18 

1 political committee only if (1) it crosses the $ 1,000 threshold and (2) it has as its "major 

2 purpose" the nomination or election of federal candidates. 

3 1. Statutory Threshold 

4 It appears that CHGO made over $ 1,000 in expenditures for independent expenditures 

5 that contain express advocacy under 1.1 C.F.R. § 100.22 and thus surpassed the statutory 

6 threshold for political committee status." As recited, in the.First General Counsel's Report, 

7 CH.GO reportedly spent $793,150 to disseminate four versions of "Song and Dance," $561,790 

8 to disseminate six versions of "Collectible Coin," and $362,810 to disseminate two versions of 

9 "Make America Work," all of which contain express advocacy and are thus independent 

10 expenditures.'" Further, the advertisements in the Complaints constituted the entirety of 

11 CHGO's $4.59 million in media costs disclosed on its 2010 Form 990." Accordingly, CHGO 

12 most likely spent significantly more than the $1.7 million identified in. the Complaints on 

13 independent expenditures to surpass the statutory threshold." 

14 2. Major Puipose 

15 The evidentiary record also demonstrates that CHGO had as its major purpose the 

16 nomination or election of federal candidates in 2010. Under the Commission's case-by-case 

17 approach to the major purpose inquiry, the Commission considers the organization's "overall 

18 conduct," including its disbursements, activities, and statements." 

Poliiical Committee Status, 72 Fed. Reg. 5595,5606 (Feb. 7, 2007) (Supplemental Explanation and 

Justification) ("Supplemental E&J"). 

First Gen. Counsel's Rpt. at 8-13. 

" Powell ROI at 2. 

" 52 U.S.C. § 30101(4)(A); 11 C.F.R. § 100.5. 

" Supplemental. E&J at 5597. 
MURs 6391 and 6471 (Commission on Hope, Growth and Opportunity) 

Second General Counsel's Report 

Page 10 of 18 

1 In assessing an organization's major purpose, the Commission has previously considered 

2 how much the organization spends for "federal campaign activity" against "activities that [a]re 

3 not campaign related.Before the investigation, the record did not indicate the extent of 

4 CHGO's spending or whether its $4.77 million budget for 2010 included activities beyond the 

•i 

5 advertisements referenced in the Complaints. The investigation has confirmed that nearly all of 

6 CHGO's spending in 2010 — $4.59 million out of a total of $4.77 million, in disbursements — 

7 was for the advertisements identified in the Complaints. Therefore, since each of CHGO's 

8 advertisements was either an express-advocacy independent expenditure or electioneering 

9 communication, both of which are indicative of major purpose, we conclude that 96% of 

10 CHGO's spending in 2010 involved federal campaign activity." 

11 Although we were able to ascertain CHGO's overall spending, we were not able to 

12 definitively itemize CHGO's spending on independent expenditures versus electioneering 

13 communications. Nevertheless, the currently available evidence reflects that CHGO's spending 

14 on express-advocacy independent expenditures appears to have been a significant majority of its 

15 spending in .2010. The Amended Complaint included an analysis of the cost of CHGO's 

16 spending by CMAG, an organization that tracks political spending on advertisements. Of the 

17 $2.2 million in CHGO advertisements tracked by CMAG, 77% were express advocacy 

" Supplemental E&J at 5605; Fir.st Gen. Counsel's Rpt at 27. 

" At the time of the First General Counsel's Report, the available information demonstrated that CHGO spent 

over $1.7 million on express advoeaey communieations and over $530,000 on non-express advoeaey eleetioneering 

eommunieations that supported or opposed a elearly identified federal eandidate. First Gen. Counsel's Rpt. at 38. 

Although CHGO and its representatives were unable to produce records showing how much CHGO spent on each 

advertisement, all of the advertisements — including electioneering communications "What She Believes," "Queen 

Nancy," and "Collectable Coin" (Minnick Version) — are the type of communications that the Commission has 

considered indicative of major purpose. Id. at 33-35. While CHGO spent $105,175 of its budget on other activities, 

including maintaining its website, commissioning a policy paper, and advertising and promotion, these arguably 

non-electoral activities represented only four percent of CHGO's spending. Compl., MUR 6471, Ex. C (Form 990 -

Return of Organization Exempt from Income Tax (Nov. 14, 2011)). Indeed, of these activities, only the $5,000 

spent to commission a policy paper appears entirely unrelated to CHGO's advertisements. 
MURs 6391 and 6471 (Commission on Hope, Growth and Opportunity) 

Second General Counsel's Report 

Page 11 of V8 

1 advertisements.^® Given that this analysis covered roughly half of CHGO'S spending, it is 

2 probable that CHGO spent the same general proportion of its total spending on express-advocacy 

3 adveitisements." If so, at least 77% of CHGO's advertisements, or 74% of its total spending, 

. 4 was for express advocacy. That such a significant proportion of CHGO's advertisements 

5 involved express advocacy suggests that the organization's major purpose is in fact the election 

6 of federal candidates. 

7 Moreover, the Commission has stated that it will consider "public statements as well as 

8 internal documents about an organization's mission" — including statements in organizational. 

9 planning documents, statements made to prospective donors detailing the organization's goals, 

10 and fiindraising solicitations — in construing the major purpose of an organization such as 

11 CHGO.^* 

12 In response to the Complaints, CHGO asserted that its entire purpose was to educate the 

1.3 public on matters of economic policy formulation and that CHGO was not a political 

14 committee.^'"' This same characterization of the group's purpose is reflected, in its Articles of 

15 Association.'*" The Commission has noted, however, that an organization's public, statements 

16 about its intended purpose will not necessarily dispose of the major purpose question."' Here, 

.16 See First Gen. Counsel's Rpt. at 38. 

" CHGO did not. seek to refute CMAG's analysis despite its inclusion in the Amended Complaint and 

CHGO's receipt of notice that the Commission may be considering the political committee status of the 

organization. 

Supplemental E&J at 5605. 

" See Supp. Resp. at 5-6 (Oct. 20,2011). 

Warring Subpoena Resp. at FEC-452-454; Cedillo Subpoena Resp. at FEC-190-192. 

Supplemental E&J at 5606; see Real Truth About Obama v. FEC, No. 3:08-cv-00483,2008 WL 4416282, 

at • 14 (E.b. Va. Sept. 24,2008) ("A declaration by the organization that they are not [organized] for an 

electioneering purpose is not dispositive.") (emphasis in Original, alteration added), aff'd, 575 F.3d 342 (4th Cir. 
4 

B 

MURs 6391 and 6471 (Commission oh Hope,. Growth and Opportunity) 

Second General Counsel's Report 

Page 12 of 18 

1 Other documentary evidence obtained as a result of the Commission's issuance of compulsory 

2 process directly controverts CHGO's public disavowals of an electioneering purpose. 

3 Several of CHGO's internal documents explicitly state that the group's purpose was to 

4 influence the election of federal candidates. First, a planning document states that CHGO's goal 

5 was "[t]o make an impact using express advocacy in targeted Senate races on key issues 

6 including financial reform, energy, taxes, pharmaceuticals, health care and other key concerns"; 

7 it also identified twelve states as "potential targets."'^^ Similarly, a PowerPoint presentation 

8 titled, "Commission on Hope, Growth & Opportunity: Supporting Pro-Growth, Free Enterprise 

9 Candidates in Targeted Senate Races" identified CHGO's goal as "mak[ingi a measurable 

10 impact on the election outcome in selectively identified Senate races by deploying advertising in 

11 a targeted, cost efficient and discreet manner.That CHGO may have later altered its strategy 

12 to target candidates for the House rather, than the Senate does not alter its plain intention to 

13 influence the election of federal candidates. Moreover, a September 15, 2010 letter from Wayne \ 

5 

14 Herman, who Mihalke identified as a CHGO "consultant," to a potential donor described CHGO | 

15 as "an organization which focuses on running independent expenditure campaigns in key > •• 

16 districts to support the election of.Republican candidates," and further assured the donor that 

17 contributions to CHGO would not be disclosed.^^ 

2009), vacated on other grounds, 130 S. Ct. 2371 (2010), remanded and decided, 796 F. Supp. 2d 736, affirmed sub 

nam. Real Truth About Abortion v. FEC, 681 F:3d 544 (4(h Cir. 2012), cert, denied, 81 U.S.L.W: 3127 (U.S. Jan. 7, 

2013) (No.. 12-311). 

" Mihalke Subpoena Resp. at M.HM-FEC-1-2. The document discusses CHGO having "an impact in 

potential primaries either with positive or negative approach" and spending ".S5-l0 million dollars for 4-6 races." 

Id. at MHM-FEC-2. 

Id. at MHM-FEC-7. The presentation identified planned advertising budgets for eleven states "for targeted, 

impact advertising to make measurable difference in key Senate races," and touted that donors would never be 

disclosed. Id. at MHM-FEC-10,12. 

Id. at 3; Warring Subpoena Resp. at FEC-299; Cedillo Subpoena Resp. at FEC-37. 
MURs 6391 and 6471 (Commission on Hope, Growth and Opportunity) 

Second General Counsel's Report 

Page 13 of .18 

1 Notably, none of the documents received during the investigation reflect that CHGO's 

2 purpose was, as it claimed in its Response, solely to educate the public oti matters of economic 

3 policy formulation. Rather, the relevant records reflect that CHGO's major purpose was to 

4 influence the election of federal candidates. 

5 In sum, CHGO made over $ 1,000 in expenditures during 2010, and its spending during 

6 that calendar year and its own records of its aims and objectives reflect that, it had as its major 

7 purpose the nomination or election Of federal candidates. Accordingly, based on the more 

8 extensive factual record now before the Commission, we again recommend that the Commission 

9 find reason to believe that CHGO violated 52 U.S.C. §§ 30102, 30103, and 30104, by failing to 

10 organize, register, and report as a political committee. 

11 B. Independent Expenditure and Electioneering Communications Reporting 

12 Violations 

13 In addition to filing a Statement of Organization and regular disclosure reports with the 

14 Commission as a political committee, CHGO should have filed 24- and 48-hour independent 

15 expenditure"*^ and electioneering communications^® reports with the Commission in connection 

16 with its expenditures for the advertisements. 

17 Previously, the Commission found reason to believe that CHGO violated 52 U.S.C. 

Under the Act, a person (including a political committee) that makes independent expenditures aggregating 

$1,000 or more after the 20th day, but more tlian 24 hours, before the date of an election, must file a report 

describing the expenditures within 24 hours. 52 U.S.C. § 30104(g)(1). A person (including a political committee) 

that makes independent expenditures aggregating $10,000 or more at any time up to and including the 20th day 

before the date of an election must file a report describing the expenditures within 48 hours. Id. § 30104(g)(2). 

Additionally, under the Act, a person (including a political committee) who makes a disbursement for the 

direct costs of producing and airing electioneering communications in an aggregate amount in excess of $10,000 

during any calendar year shall, within 24 hours of each disclosure date, report such electioneering communications 

to the Commissioh. Id. § 30104(f)(1); 11 C.F.R. § 104.20. 
MURs 6391 and 6471 (Commission on Hope, Growth and Opportunity) 

Second General Counsel's Report 

Page 14 of 18 

1 § 30104 by failing to report the advertisements at issue in this matter. The investigation 

2 demonstrated that CHGO spent a total of $4.59 million for independent expenditures and 

3 electioneering communications. CHGO spent at least $793,150 to disseminate four versions of 

4 "Song and Dance," $561,790 to disseminate six versions of "Collectible Coin," and $362,810 to 

5 disseminate two versions of "Make America Work," all of which contain express advocacy and 

6 are tlius independent expenditures."' CHGO also spent at least $415,270 to disseminate "What 

7 She Believes," $41,100 to disseminate "Queen Nancy," and $74,120 to disseminate the Minnick 

8 version of "Collectible Coin," all of which constitute electioneering communications."® The 

9 exact amount spent on the advertisements is undoubtedly higher, given CHGO's total media 

10 spending, but all of the amounts are above the thresholds for required 24- or 48-hour, notices."' 

11 Accordingly, it appears that CHGO violated 52 U.S.C. .§ 30104(g) and (f) by failing to file 

12 required independent expenditure and electioneering communications reports. 

13 C. Disclaimer Violations 

14 Finally, CHGO failed to include complete disclaimers on its advertisements. Whenever a 

15 political committee makes a disbursement for the purpose of financing any communication 

16 through any broadcasting station, newspaper, magazine, mailing or other type of general public 

17 political advertising, the communication must clearly state that it has been paid for by the 

18 political committee.'" Communications not authorized by a candidate, authorized committee of a 

" First Gen. Counsel's Rpt. at 8-13. 

Id. at 14-20. As CHGO and its representatives did not have records related to advertising placement, the 

investigation did not produce any additional information regarding the "targeting" of CHGO's electioneering 

communications under 11 C.F.R. § 100.29(b)(5)(i). 

" We are also unable to determine the timing of the communications and required reports due to the lack of 

available records. 

50 52 U.S.C, § 30120(a). 
MURs 6391 and 6471 (Commission on Hope, Growth and Opportunity) 

Second General Counsel's Report 

Page 15 of] 8 

1 candidate, or an agent of either, must clearly state the full name and permanent street address, 

2 telephone number, or World Wide Web address of the person who paid for the communication, 

3 and that the communication is not authorized by any candidate or candidate's committee.^' 

4 Television communications paid for by persons other than candidates and not authorized by a 

5 candidate must include an audio statement by a representati ve of such person indicating the name 

6 of the person responsible for the content of the advertising, the so-called "stand by your ad" 

7 requirement." 

8 The advertisements at issue were television broadcast communications fimded by a 

9 political committee and thus were required to include a complete disclaimer. The written 

10 disclaimer on each CHGO advertisement reads: 

11 Paid for by the Commission on Hope, Growth and Opportunity, a tax1.2 exempt 501 c(4) [^/c] organization and not a federal political committee. 

13 This message is not coordinated with any candidate or committee. 

14 www.hopegrowthopportunity.org." 

15 As explained in further detail in the First General Counsel's Report, CHGO failed to include 

16 proper disclaimers stating that its communications were not authorized by any candidate or 

17 candidate's committee.^^ CHGO also failed to include proper audio disclaimers on each of its 

18 advertisements." Accordingly, we recommend that the Commission find reason to believe that 

19 the Commission on Hope, Growth and Opportunity violated 52 U.S.C. §§ .30120(a)(3) and 

20 30120(d)(2). 

Id. § 30120(a)(3); 11 C.F.R. § 110.11(b)(3). 

52 U.S.C. § 30120(d)(2); 11 C.F.R. § 110.11 (c)(4)(i)-(ii). 

Resp. a.t 4; Compl., MUR, 6471, Attaeh. 

First Gen. Counsel's Rpt. at 21-22. 

" Id. at 22-23. 

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MURs 6391 and 6471 (Conunission on Hope, Growth and Opportunity) 

Second General Counsel's RepoH 

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MURs 6391 and 6471 (Commission on Hope, Growth and Opportunity) 

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MURs 6391 and 6471 (Commission on Hope, Growtli and Opportunity) 

Second General Counsel's Report 

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1 VI. RECOMMENDATIONS 

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5. 

Find reason to believe that the Commission on Hope, Growth and Opportunity 

violated 52 U.S.C. §§ 30102, 30103, 30104, 30120(a)(3), and 30120(d)(2); 

Enter into pre-probable cause conciliation with the Commission on Hope, Growth and 

Opportunity; 

Approve the attached Factual and Legal Analysis; 

Approve the appropriate letter. 

Daniel A. Petalas 

Associate General Counsel 

for Enforcement 

William A. Powers 

Assistant General Counsel 

KMJUi. s: 

Kasey:S( Casey MorgenlV Moruenh^im 

Attorney 

TanyjPD.. Senanayake \J. 

Attorney